Investors in U.S. floating-rate municipal bonds have more access to information now under rules established after the financial crisis roiled the market three years ago.
The Municipal Securities Rulemaking Board, the industry’s regulator, said that beginning yesterday investors could access its website for information about the bidding at auctions that set the interest rates on the securities. They can also find documents on key credit lines tied to the bonds. The changes will raise transparency to an “unprecedented level,” according to a statement by Lynnette Hotchkiss, executive director of the board.
The rules are aimed at corners of the $2.9 trillion municipal bond market where state and local governments borrow for decades at short-term interest rates. Issuers guarantee investors that they will be able to sell the securities after holding them for only a week or month, which makes them willing to accept lower yields.
One segment of that market, for so-called auction-rate securities, was upended in 2008 when Wall Street banks stopped using their own cash to buy unwanted bonds when investors exited. When those auctions failed, investors were stuck with securities they couldn’t sell and debtors had to pay penalty interest rates.
The market for variable-rate demand obligations, or VRDOs, was also disrupted by the credit crisis. The new MSRB disclosures will make it easier for investors by putting documents now available through brokers in one place, said Joanna Brody, a managing director who runs the short-term municipal bond desk at Piper Jaffray & Co. in New York.
Finance Chiefs Back IMF; Focus on Strauss-Kahn’s Successor
Finance ministers sought to bolster confidence in the International Monetary Fund as they began discussing a successor to Managing Director Dominique Strauss-Kahn, who was jailed on charges including attempted rape.
Canadian Finance Minister Jim Flaherty said he is “absolutely confident” the IMF will “carry on with its business” under Acting Managing Director John Lipsky. French Finance Minister Christine Lagarde said the 187-member lender to governments is “solid.” Kaoru Yosano, Japan’s economy minister, said the flap won’t compromise the fund’s mission.
Germany and Belgium said they prefer another European as head of the agency, responding to a push by developing countries to throw open its leadership. There are “good reasons” for Europe to keep the post amid the euro area’s debt crisis, German Chancellor Angela Merkel told reporters in Berlin.
IMF spokeswoman Caroline Atkinson told reporters yesterday that the fund is “fully operational” and working on matters for its member countries around the world. Still, much of the talk in Washington and in European capitals focused on who would replace Strauss-Kahn if he leaves office before the scheduled end of his term more than 17 months from now.
The IMF’s executive board, meeting in Washington, agreed to seek contact with Strauss-Kahn about his intentions, according to an official briefed on the deliberations. Strauss-Kahn, a 62-year-old former French finance minister accused of sexually assaulting a hotel housekeeper, was sent to New York’s Riker’s
France to Require Immediate Rural Coverage in Spectrum Sale
France’s government will require mobile-phone operators to introduce fourth-generation wireless coverage to rural areas and big cities simultaneously as a condition of its $3.5 billion sale of frequency spectrum.
A “priority zone” for 4G coverage, which offers much higher mobile data speeds than existing technologies, will cover 18 percent of the French population and 80 percent of the country’s land area, Industry Minister Eric Besson said in prepared remarks for a speech delivered near Paris yesterday.
The French state is seeking at least 2.5 billion euros ($3.5 billion) for the spectrum, which operators will be able to use beginning next year, Besson said. The auction will also require operators to cover 90 percent of the population in each of the 96 departments that cover mainland France within 12 years. That measure, imposed for the first time, is another step to increase rural coverage.
European countries are opening wireless spectrum vacated by analog television signals, making faster data transmission possible and extending high-speed service to new areas. A planned U.K. auction may raise as much as 2.6 billion pounds ($4.2 billion), communications regulator Ofcom said in March.
The French government is also aiming to encourage more competition among mobile-phone operators as customers in France pay more than those in most European countries, according to the Paris-based Organization for Economic Cooperation and Development.
German FDP Eyes Share-Capital Rule for Banks, Handelsblatt Says
German Chancellor Angela Merkel’s coalition partner, the Free Democratic Party, wants banks and insurers to hold share capital as a backup to offset risks from European government bonds, Handelsblatt reported, citing a draft motion for resolution.
Portugal Bailout Approved as EU Presses Greece to Sell Assets
European finance ministers endorsed a 78 billion-euro ($110.8 billion) bailout for Portugal as they stepped up pressure on Greece to do more to win improved aid terms.
Portugal followed Greece and Ireland in seeking emergency loans from the European Union and International Monetary Fund, bringing to 256 billion euros the aid provided to stamp out the sovereign debt crisis.
The backing for Portugal came during deliberations in Brussels yesterday clouded by the absence of International Monetary Fund Managing Director Dominique Strauss-Kahn. Europe’s rich countries tied extra money for Greece to pledges that it reap more revenue at home and weighed whether to make bondholders share the pain.
German Finance Minister Wolfgang Schaeuble said there “certainly” would not be a decision on Greece yesterday, since European and IMF experts have yet to complete an updated assessment of the Greek economy.
For more, click here. For related news on Strauss-Kahn, see Comings and Goings and Interviews/Speeches sections, below.
Nasdaq, ICE Drop NYSE Bid, Clearing Way for Deutsche Boerse
Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. withdrew their bid for NYSE Euronext after the U.S. Department of Justice threatened a lawsuit, sending NYSE Euronext down by the most in 2 1/2 years as the takeover battle for the Big Board ended.
NYSE Euronext agreed to be bought by Frankfurt-based Deutsche Boerse AG on Feb. 15, creating the world’s largest exchange operator. The NYSE Euronext board twice rejected a rival proposal from Nasdaq OMX and ICE, saying the unsolicited offer would lead to too much debt and regulatory opposition.
Nasdaq OMX Chief Executive Officer Robert Greifeld finds himself without a partner in the global wave of mergers that has swept the exchange industry. The second-biggest U.S. exchange operator was counting on its plan to merge its stock-trading and listings operations with NYSE Euronext as a way to eliminate costs in businesses where competition has reduced its profits and market share. Nasdaq OMX would have gained a monopoly on corporate listings.
Nasdaq OMX and ICE’s withdrawal paves the way for NYSE shareholders to approve the merger with Deutsche Boerse at a special meeting scheduled for July.
The U.S. Department of Justice said in a statement on its website that it would have filed an antitrust lawsuit to block a purchase of NYSE Euronext by Nasdaq OMX and ICE.
For more, click here.
Total, Arkema Lose EU Appeal of 59 Million-Euro Cartel Fine
Total SA’s Elf Aquitaine unit and former Total subsidiary Arkema SA lost appeals of a 59 million-euro ($83.5 million) fine levied three years ago for fixing the price of a chemical used to make paper.
The European Union General Court, the second-highest tribunal in the 27-nation bloc, rejected bids by Arkema France and Elf Aquitaine to annul or cut the fine, ruling in Luxembourg today that the European Commission “did not commit an error” in its decision in the case, which began in March 2003.
The French companies’ punishment was part of a 79 million-euro penalty that the commission, the EU’s antitrust regulator, levied on four companies in June 2008 for participating in an unlawful cartel on prices of sodium chlorate paper bleach.
Total is “not able to comment as we need time to study the decision,” Sandra Dante, a spokeswoman for the France, Paris-based company said in an e-mail. Sybille Chaix, a spokeswoman for Arkema, based in Colombes, France, didn’t immediately respond to a call seeking comment.
The case is T-299/08, Elf Aquitaine v. Commission; T-343/08, Arkema France v. Commission.
Juncker Says He’s Deeply Sad About Arrest of IMF’s Strauss-Kahn
Luxembourg’s Jean-Claude Juncker said he was “very, very sad” about the arrest in New York of International Monetary Fund Managing Director Dominique Strauss-Kahn on sexual-assault charges.
“To see Dominique Strauss-Kahn in handcuffs on television this morning has deeply saddened me,” Juncker told reporters in Brussels late yesterday after leading a meeting of European finance ministers. “I have the feeling to be in a bad movie.”
Juncker said ministers didn’t discuss Strauss-Kahn during their talks.
O’Neill Says EU Must Not Delay on Greek Restructuring
Jim O’Neill, chairman of Goldman Sachs Asset Management, discussed this weekend’s arrest of International Monetary Fund Managing Director Dominique Strauss-Kahn and the European sovereign-debt crisis.
O’Neill, who spoke with Andrea Catherwood on Bloomberg Television’s “Last Word,” also talked about the IMF’s leadership outlook and Mario Draghi’s candidacy to replace Jean-Claude Trichet as president of the European Central Bank.
For the video, click here.
Markets Need ‘Attention’ After Bank Probes, Almunia Says
Joaquin Almunia, the European Union antitrust regulator who is already investigating 16 investment banks, said financial markets still need “a lot of attention” to aid the continent’s economic recovery.
The European Commission is “trying to avoid that the financial markets will consolidate abuses or will eliminate the possibility for new entrants to introduce more competition and more efficiency,” Almunia, the EU competition commissioner, said in an interview at Bloomberg’s offices in London.
“The economy will need a more dynamic, more efficient, more solvent and more stable financial system,” said Almunia, who was the EU commissioner for monetary and economic affairs from 2004 through 2010. “We need to improve the functioning of our markets from the point of view of efficiency.”
Almunia increased scrutiny of financial markets last month with probes into whether banks colluded to shut out rivals from information on the swaps market.
Erste’s Treichl Says Politicians ‘Cowardly’ on Basel III Rules
Erste Group Bank AG Chief Executive Officer Andreas Treichl sparked a row in Austria when he said the country’s politicians are “too stupid and too cowardly” to resist tougher international capital rules.
The Basel Committee on Banking Supervision’s proposed Basel III rules, which require banks to hold more capital, will hurt both Erste and the Austrian economy, Treichl, 58, said in a May 13 speech to members of the co-governing Austrian People’s Party in Salzburg. The comments were first reported the following day by state broadcaster ORF.
“This is a gross blunder,” Treichl said, according to a recording of his speech that ORF broadcast May 15. “Our politicians are too stupid and too cowardly and too clueless for that because they don’t know anything about economics. This is going to hurt Austria.”
Government officials responded that Erste received 1.2 billion euros ($1.7 billion) of state aid in 2009, following the collapse of Lehman Brothers Holdings Inc.
Comings and Goings
IMF’s Strauss-Kahn Ordered Held Without Bail in New York
International Monetary Fund chief Dominique Strauss-Kahn, accused of attempting to rape a hotel housekeeper, was ordered held without bail by a New York judge after prosecutors argued he presented a flight risk.
Strauss-Kahn appeared in Manhattan criminal court yesterday, two days after he was taken into custody aboard an Air France flight at John F. Kennedy International Airport as it prepared to depart. The IMF chief faces several charges including attempted rape in the first degree, according to court papers. Strauss-Kahn, 62, has denied the charges and will plead not guilty, his lawyer Benjamin Brafman has said.
Strauss-Kahn didn’t enter a plea yesterday. His next court appearance was set for May 20. Brafman told reporters gathered at the courthouse that he would appeal the bail decision.
The alleged attack on a 32-year-old woman at a Sofitel hotel in midtown Manhattan occurred May 14, according to the New York Police Department. Strauss-Kahn was picked out of a lineup by the maid, police said.
The IMF has now called upon John Lipsky to guide it through the eurozone debt crisis. He was named acting director May 15.
The case is People v. Strauss-Kahn, 1225782, Criminal Court of the City of New York (New York County).
For more, click here, and see Interview/Speeches section, above.
Draghi Backed by Euro Finance Ministers as Next ECB President
Euro-area finance ministers put Mario Draghi on track to become the next head of the European Central Bank as the region struggles to contain a debt crisis sparked by ballooning deficits in southern Europe.
The ministers from the 17 nations using the euro endorsed Draghi, 63, to take over the ECB in November, Luxembourg’s Jean-Claude Juncker, who leads the group, told reporters in Brussels late yesterday. ECB President Jean-Claude Trichet’s eight-year term ends on Oct. 31.
Draghi “is a central banker who has proven throughout his career that he holds the principles of the euro dear,” Juncker said. The head of the Bank of Italy is “a man who brings together all the necessary qualities to be a worthy successor to Jean-Claude Trichet, who was an eminent president,” he said.
German Chancellor Angela Merkel last week praised Draghi as the right successor for Trichet because he is “very close to our ideas of a stability culture.” The Rome native became the ECB frontrunner in February when Merkel’s contender, then-Bundesbank President Axel Weber, pulled out of the race.
Draghi, a Massachusetts Institute of Technology-trained economist, has worked at the World Bank and Goldman Sachs Group Inc. He is also chairman of the Financial Stability Board.